The concept is to offer the cars and trucks while they are in customers’ hands in a dealer-only, online forum.
The benefit to lenders is to cut costs associated with a traditional auction and eliminate the time that off-lease units otherwise would spend in the lender’s possession, said Mark O’Neil, CEO of DealerTrack in Garden City, N.Y.
Expenses mount quickly, O’Neil said. DealerTrack estimates that it costs lenders about $450 to send a car through a traditional auction, including inspection, reconditioning, transportation and auction fees. Depreciation adds another $8 to $12 per day.
“Used cars are more like tomatoes than fine wine. They do not improve with age,” O’Neil said.
On Aug. 20, DealerTrack announced a partnership with Manheim Auctions Inc. in Atlanta to offer used vehicles online from Chase Auto Finance Corp. and Wells Fargo & Co. starting about 30 days before the lease ends. DealerTrack is a joint venture among Chase, which also is in Garden City; Wells Fargo in San Francisco; and subprime auto lender AmeriCredit Corp. in Fort Worth, Texas.
The three lenders generate 20,000 used cars a month, said Frank Noto, product manager for the DealerTrack used-car program, but AmeriCredit’s repossessed vehicles won’t be added until next year.
“Not all of the (20,000 vehicles) will be offered online,” Noto said.
DealerTrack’s initial function was to collect online credit applications, but the company is expanding into online finance contracts and the online used- car program.
How it worksTechnically, dealerships bid for the right to buy the vehicle once it is turned in. If the customer wrecks or decides to buy the vehicle, the deal would be canceled. If the vehicle isn’t purchased before it goes off-lease, DealerTrack will continue to offer it for sale online for 48 hours, after which the vehicle is sold at a traditional auction.
Initially, Chase and Wells Fargo will set prices for the nearly off-lease units, said Craig Stokum, DealerTrack director of sales and product development. But the online system is set up so that it eventually will allow dealers to bid as they do at other online auctions, he said.
Similar programsSeveral lenders, including General Motors Acceptance Corp., already offer dealers off-lease units or used rental cars online before they reach a traditional auction, but only after the customer turns them in.
Volvo Finance North America is creating a program, to be launched this fall, to offer its dealers nearly off-lease vehicles. Its program differs from DealerTrack in that the online sale will be for Volvo dealers exclusively. The dealership to which the off-lease vehicle will be turned in has first rights to the unit. If that dealership doesn’t buy the vehicle, other Volvo dealers may bid. American Honda Finance Corp. has a similar program.
The DealerTrack program starts in November and should be rolled out nationally by January, the company said.
The two banks do business with 7,000 dealers who will be eligible to buy the online vehicles.
Only dealers affiliated with Chase will be eligible to bid on Chase’s off-lease units. Only Wells Fargo dealers will be able to bid on Wells Fargo inventory.